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Sustainability Certification in the Biofuel Sector

A Case Study of Brazilian Ethanol

The European Union (EU) and the United States have adopted aggressive programs to promote the greater use of biofuels. One of the goals is to reduce carbon emissions by replacing gasoline with low carbon fuels. Individual EU countries have adopted certification programs to ensure that imported biofuel meets its goals for lower carbon emissions as well as broader goals of enhancing the sustainable use of natural resources. This paper assesses how these certificate programs have affected biofuel production in one developing country – Brazil – and identifies some of the lessons learned in designing future certification programs.

Certification programs have been used in many industries, such as timber and fishing to influence the manner in which these commodities are produced. When global supply chains exist, such programs can improve the environmental and social impacts of production and promote better practices along the entire supply chain. The success of these programs relies on their ability to build trust between the participants along the chain, since one link easily observes the action of the others. Third party certification programs – which rely on non-corporate governing bodies and involve NGOs – can create greater levels of trust given their independence and, in many cases, their legitimacy.

The report challenges the idea of the central importance of market benefits as the driving force behind private regimes for environmental and social governance. Sustainability certification is seen as a polycentric institution that facilitates interactions between many actors, and where the involvement of large scale purchasers and of environmental and social NGOs are essential supplements to government institutions in setting and enforcing the legal framework.

Results confirm this assumption. Many factors affect the effectiveness of certification processes including the governance structure of the partnerships, the demand for certified production, the legislation and policy in place, the level of enforcement, land tenure and ownership patterns and, finally, the structure of the industry.

Main evidences from the study show that:

The European regime on sustainable biofuels has contributed to advancing the process toward sustainability in Brazil by creating a favorable environment for policy reforms and company consolidation, but it has not delivered its full potential because of two main factors: the size of competing markets and the limitations due to the Directive’s definition of sustainability.

Responding to pressures from buyers, Brazilian sugarcane producers have made considerable efforts to defend their reputation as a sustainable industry. Most of the certified mills belong to export-oriented, vertically-integrated companies that use certification in order to respond to the requirements of multinational buyers operating in sensitive markets. The demand for certified sugarcane in Brazil derives primarily from large-scale sugar buyers.

The first Brazilian mills to comply with certification protocols are usually characterized by an already-existing high level of compliance with social and environmental regulations.

Although demand for certified sugarcane is growing, the development of environmentally-sensitive markets is still insufficient to promote certification on a large scale. Additional demand could derive from the growth of new industries such as green chemistry.

The size of the market would benefit from the removal of existing trade barriers, especially in the EU, and this would contribute to enhancing sustainability.

The "Bonsucro" certification partnership has acted in Brazil as an important forum for consensus formation between actors. In order to facilitate compliance the industry and NGOs have collaborated in offering technical and financial assistance to producers.

Increasing economies of scale and land concentration have meant that to date the benefits of sugarcane ethanol production for small landowners have been limited, and large farmers and industrialists have benefited more from the industry’s expansion.

Balancing growth and sustainability still faces a number of challenges. These concerns include soil degradation, erosion and compaction, and social impacts such as the distribution of benefits among the various actors in the supply chain.

The omission of social sustainability concerns from the EU RED may lower the bar on sustainability rather than complement the commercial and civil society actors that are demanding voluntary sustainability certifications.

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